So shortly after the tax law was passed, I wrote a book about it (The Short Cheap Tax Book on the Trump/GOP Tax Law). In the book, I included a link to a spreadsheet that I created to convert a 2017 tax return into a return using the new law. I took every tax return I did (646 of them) and used this spreadsheet to determine how much taxes would be paid under the new law as opposed to the current law (later my tax software was updated to do this automatically). Below are results based on those calculations, as well as some conjecture and suggestions.
But first, some caveats: while the spirit of the below discussions is true, ANYTHING that could even remotely risk disclosing of private client information has been modified to maintain the basic truth of the situation while eliminating the risk of disclosure. Any opinions are my own, and not those of the IRS or my employer. None of this information or advice should be relied on as the sole source of decision making data. Advice you can count on and use is paid for ;). My dataset is skewed by my region and my clients. For example, only 2 of my clients made more than $315,000 the point at which the new tax law gets weird for businesses. I also do a high proportion of military clients and rental property owners.
So here are the bullet points:
27 of the 646 tax returns would do worse under the new law.
People with children under 17 did especially well, especially those who made over $100,000.
Small business owners and rental property owners did well.
Very low-income families did better, but not as much better as families with middle to higher incomes.
Truck drivers, flight attendants, outside salespeople, and people who work from home did very poorly. If you are one of these you need to take a serious look at what you are withholding. Basically, if you have a large amount of deductible employment expenses - you're about to get screwed.
Upper and middle-class families with large amounts of itemized deductions didn't do well.
People making over $200,000 did very well, especially if they had children under 17.
People filing Head of Household are going to do well under the new law (unless they've been lying about it).
I have about 20 clients subject to the Alternative Minimum Tax - none of them would be under the new law.
Married Filing Separately will be even less desirable next year compared to Married Filing Jointly.
Most people's paychecks went up in late February as they lowered withholding to adjust for the new tax rates. Most people didn't realize this was why.
Between a gut feel based on looking at the new withholding tables, and reviewing information from clients who brought in pay stubs, I'm pretty sure the tables overestimate the effect of the law, such that most people will get a smaller refund next year, though they are getting that money in their paychecks.
If you had a very small refund last year ($1000 or less), you should probably drop your withholding allowances by 1, or use the IRS withholding calculator to figure out what you should be claiming.
Don't be surprised if you get a lot more questions about filing Head of Household next year. They added it to the list of things (now 4 of them) that we can be fined for if we aren't suspicious enough about it (called due diligence).
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